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Commodities

Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts

Crude oil prices recorded impressive gains amid high hopes that leading oil producers will suspend plans on increasing oil supply.

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Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts, Brent Crude up, Trump leads in Michigan, Pennsylvania

Crude oil prices recorded impressive gains in barely four days, gaining as much as 12% amid high hopes that the world’s leading oil producers will suspend plans on increasing oil supply as soaring cases of COVID-19 onslaughts distort fuel demand.

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What you should know

At the time of drafting this report, U.S. West Texas Intermediate (WTI) futures were priced at $41.53 a barrel, while Brent Crude traded at $43.87 a barrel.

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  • It should be noted that both major oil benchmarks, Brent crude and WTI traded at $39/barrel and $37/Barrel respectively prior to this week’s trading session.
  • Crude oil prices are up 12% in barely four days on the macro that such bailout from OPEC would ease pressure on the spiral fall of the black fossil, coupled with the news on Pfizer’s COVID-19 vaccine, gave the bulls enough energy to break above $43/barrel in the case of Brent crude.
  • Algeria’s Energy Minister had earlier disclosed yesterday, on OPEC+ would most likely consider extending current production cuts of 7.7 million (BPD) into 2021, or deepen them more if the case arises.

READ: Gold prices drop, Trump wins Texas, Ohio

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in an explanatory note to Nairametrics, spoke on the present fundamentals pushing crude oil prices to record high amid COVID-19 resurgence.

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READ: NNPC to recommence oil exploration in Lake Chad Basin

“At this time, Christmas came early to the producers, where selling was evident, as higher prices invited December hedging. But for those investors chasing the prompt market higher on the vaccine impulse, when they should be getting bulled up on the back end of the curve, they might end up with the proverbial lump of coal in their holiday stocking, as it is the pandemic that counts first before the vaccine, when it comes to the prompt delivery for oil markets. The medical advances are likely to help the economy and oil market normalize through 2021.”

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What to expect

Still, the winter of gloom continues to look challenging, and hence OPEC+ supply-side action to counter demand softness will be critical in the near-term.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Message Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Commodities

Lagos Commodities Exchange to start gold trading

The move is in support of the Federal Government’s effort to reduce dependence on oil, diversify the economy and boost the country’s foreign exchange earnings.

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Nigeria's first gold refinery to provide over 500,000 jobs

The Lagos Commodities and Futures Exchange has concluded plans to commence trading of gold with the admission of Dukia Gold’s diversified financial instruments, backed by gold as the underlying asset.

The move is in support of the Federal Government’s effort to reduce dependence on oil, diversify the economy and boost the country’s foreign exchange earnings.

Dukia Gold said the financial instruments, which would be in form of exchange-traded notes, commercial papers and other gold-backed securities would enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the government to diversify external reserves and create jobs across the metal production value chain.

While making the disclosure, during a Pre-Listing media interactive session in Lagos on Thursday, the Chairman of Dukia Gold, Mr Tunde Fagbemi, applauded the Ministry of Mines and Steel Development and the Security and Exchange Commission (SEC) for supporting trading of gold in Nigeria.

What the Chairman of Dukia Gold is saying

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us to facilitate our infrastructure development, expand capacity and create fungible products.

This has the potential to shore up Nigeria’s foreign reserve and create an alternative window for the preservation of pension funds. Gold-backed security is a hedge against inflation and convenient preservation of capital.”

Fagbemi pointed out that the company has refinery services to smelt metals with the capacity to meet local and international demand.

Going further, he said, “As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located.’’

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Context of Gold Mining in Nigeria

It can be recalled that the Federal Government, in June 2020, commissioned the operations of Dukia Gold and Precious Metals Project (DGPMP). The project is expected to enable Nigeria to mine its gold reserves properly, trade responsibly and refine locally.

The Vice President, Prof. Yemi Osinbajo, while performing the virtual commissioning of the project, said Nigeria has potential reserves of 200 million ounces of gold reserves.

Osinbajo said that he believed that the Dukia gold project would encourage the emergence of smaller-scale mining companies which, for the first time, would have a transparent and welcoming market for their mined gold and precious metals.

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Commodities

Oil prices surge over China’s growing appetite for energy

British based contract ticked up by 0.3% to trade at $63.59 a barrel while the WTI futures edged near $60 a barrel.

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Where next for oil prices?, Brent crude futures gained 0.14 to trade at $34.70 at the time this report was drafted, recovering some of its losses earlier in the oil trading session. , Brent crude price fails to remain over $40, concerns over pledge cut strengthens

Oil prices rallied high at the second trading session of the week as data from the world’s second-largest oil consumer’s (China) import growth picked up coupled with rising tensions in the Middle East after rebels from Yemen disclosed that they fired missiles on Saudi’s energy infrastructure.

At the time of writing this report, the British based contract ticked up by 0.3% to trade at $63.59 a barrel while the West Texas Intermediate futures edged near $60 a barrel.

READ: Oil prices soar above $70 a barrel over terrorist attacks on Saudi’s oil station

The world’s second-largest economy recorded impressive gains for last month in yet another boost to China’s economic recovery as global demand gained momentum. Crude oil imports into China surged by 21% in March from a low base of comparison a year earlier.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the parabolic of the energy market, as oil traders seem to be uninspired on the resurging COVID-19 virus;

“The oil market’s magnetic attraction to the $63 level should tell us much about the near-term outlook amid conflicting signal of new Covid waves coming to shore ahead of what should be a summer gasoline buying bonanza.

READ: Did OPEC+ April fool the oil market?

But overall, this is an oil market that feels completely uninspired outside of a few micro lurches here and there.

Still, positive comments on the US economy from Fed Chairman Powell help to reassure the outlook for oil demand, balancing concerns about the continued spread of Covid-19 in some regions.”

What to expect

Recent price actions suggest oil traders might hold the $60 a barrel baseline in the near term even if U.S Treasury yields surge while struggling to resolve with what form and fashion the next leg of the reflation trade will take.

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